Expected USD/CAD Range: 1.038 – 1.045
Update: Housing price figures in Canada and jobs numbers in the US came in at slightly better than expected levels this morning. The currency market barely reacted with the Loonie strengthening slightly but continuing to trade at around three week lows against the US Dollar. Markets are now focused on employment numbers in Canada due to be released tomorrow at 8.30.
The Big Picture: The commodity boom has seemingly ended (or is at least sputtering). Relatedly, Chinese and other emerging market economies have slowed notably. At the same time, the ongoing (admittedly halting) recovery in the US will sooner or later lead to a tapering of the Fed’s policies aimed at balance sheet expansion. Closer to home, Canada’s new central banker shows no inclination towards tightening in the near future. As a result of all of this and not surprisingly, the CAD has declined 5% relative to the USD since the beginning of the year. We expect the CAD to be even lower relative to its US counterpart by the end of the year.
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